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Case #883
$180 million direct mail catalog company
This company served the home decorating sector
as well as two women’s fashions marketplaces.
With three distinct catalog companies—including
a Midwestern centralized call center—contributing to
$180 million in revenues, net income totaled less than $1
million in 1999 and 2000. Net income losses were projected
in excess of $5 million in 2001 when Morris-Anderson &
Associates was hired.
A failed computer conversion was identified
as the most significant factor in the loss of profitability.
Additionally, covenants on bank loans were not met, cash availability
under existing collateral formulas had dropped to dangerous
levels and vendors were extended.
Our crew implemented weekly detailed cash forecasting
discipline, while dramatic inventory reductions in all three
companies improved cash availability. We also consolidated
three warehouses into one for significant cost reductions
and reverted to the prior, more reliable IT system.
Other changes included a new CFO and the termination
of several middle managers, the sale of one building and refinance
of a second, and implementation of renegotiated vendor management
programs.
After reducing bank loans by $4 million, our
crew left the company with projected net income of $7.5 million
for 2003.
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